Saturday, May 14, 2016

Russians Face Sustained Declines in Standard of Living for the Foreseeable Future, Economist Says

Paul
Goble

Staunton, May 14 – Dmitry Prokofyev,
a St. Petersburg economist, says that barring an unexpected shock, Russia faces
declines of its GDP of 1.0 - 1.5 percent a year for the foreseeable future, a
trend that will exacerbate differences between life in the megalopolises which may
improve somewhat and life elsewhere which will deteriorate.

In an interview to the “Svobodnaya
pressa” portal, Prokofyev says that “the most probable prognosis for the coming
years is a deepening of the structural recession of the present. With each
year, things will become a little worse, and even a rise in oil prices will not
guarantee economic growth” (svpressa.ru/society/article/148523/).

“In the best case,” he continues, “there
could be a return to the 2010 level of incomes,” although he is clearly skeptical
about that.

“The specific nature of the current
situation is that it could drag on for decades, if of course some sort of shock
… does not occur,” in large measure because “the basic model of the economy” of
Russia – trading resources for technology – “isn’t changing” and indeed hasn’t
changed since the days of Ryurik.

Why should anyone expect it to
change in the next ten or twenty years? “One
shouldn’t lie to oneself! It is better to think how to use these resources,” putting
money aside in the “fat” years and spending it in the “thin” ones.But even that will not save the standard of
living for a all Russians but only in “powerful urban agglomerations like
Moscow, St. Petersburg, Leningrad oblast, and Kazan with their adjoining
regions.”

Those who go on and one about saving
the Russian village and maintaining “’traditional ways of life’” are engaging
in “economic charlatanism,” Prokofyev says.“Megalopolises tied to together by a network of air routes” is the only
way to hold the Russian economic space together and improve the lives of those
who life in the biggest cities.

According to the economist, “the
Russian people have understood this for a long time, and all who can are
running to the big cities. To oppose this trend is senseless and unproductive.”
There is simply no way for Russia to develop as an agrarian country. Its
agricultural output accounts for a maximum of three percent of GDP.

Summarizing his argument, Prokofyev
says that in the next few years, “the level of consumption and the incomes of the
population will continue to fall. Instead of the economic growth that Russians
are promised, there will be a loss of 1.0 to 1.5 percent of GDP annually, a
trend that will result in a kind of ‘return’ to the beginning of the 2000s.”

No reforms being discussed will make
much of a dent on this, he continues, because the economy is “a very inert
system.”

Looking out further, the economist
argues, “by 2030, the quality of life of Russians will depend to the largest
extent on the place of residence – much more strongly than now.‘Conditionally-unsuccessful’ regions will begin
to lose their human capital while ‘successful’ ones will gain it.”

This is “objectively” the most
likely pattern, he says.“Could there be
changes for the better?” Yes, he says, “they are possible, but they will need
time” to be implemented and have an impact.